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Shoretel Reports Financial Results For First Quarter Fiscal Year 2016

The following excerpt is from the company's SEC filing.

ShoreTel Connect Rolled Out

Record Cash Flow from Operations

SUNNYVALE, Calif., Oct. 22, 2015 /PRNewswire/ -- ShoreTel® (NASDAQ: SHOR), the leading provider of brilliantly simple phone systems and unified communications (UC) solutions, today announced financial results for the first quarter of its fiscal year 2016, which ended September 30, 2015.

For the first quarter of fiscal 2016, total revenue was $90.2 million, compared to $90.4 million in the first quarter of fiscal 2015. Non-GAAP net income, which excludes stock-based compensation charges, amortization of acquisition-related intangibl es, other adjustments and related tax changes, for the first quarter of fiscal year 2016, was $6.2 million, or $0.09 per diluted share. This compares with a non-GAAP net income of $4.7 million, or $0.07 per diluted share, in the first quarter of fiscal 2015. GAAP net income was $2.1 million, or $0.03 per diluted share, in the first quarter of fiscal 2016, compared with a GAAP net income of $0.4 million, or $0.01 per diluted share, in the first quarter of fiscal 2015.

"In the quarter, we rolled out ShoreTel Connect, reignited our cloud bookings growth, expanded our hosted gross margins and delivered record cash flow from operations," said Don Joos, president and CEO of ShoreTel. "We are now in the third and final phase of our strategic transformation and we continue to operate from a position of strength with momentum and accelerating results. We look forward to providing a business update and outlining our catalysts for growth during our Analyst Day on November 4

in New York City."

First Quarter of Fiscal 2016 Financial Highlights

Recurring revenues, which consist of all hosted and related services revenue plus support revenues, represented 51 percent of total revenue in the first quarter of fiscal 2016 and reached an annualized value of $184 million; an increase of 15 percent compared to the first quarter of fiscal 2015.

Non-GAAP total gross margin, which excludes stock-based compensation charges, amortization of acquisition-related intangibles and other adjustments, for the first quarter of fiscal year 2016, was 66.0 percent, compared with 61.3 percent in the year-ago period. GAAP gross margin for the first quarter of fiscal year 2016 was 64.4 percent compared with 59.5 percent in the first quarter of fiscal year 2015.

Hosted revenues of $29.6 million were up 19 percent year-over-year and 4 percent sequentially. Non-GAAP hosted gross margin increased to 56.9 percent in the first quarter of fiscal 2016, representing a significant improvement over the 42.1 percent in the first quarter of fiscal 2015. GAAP hosted gross margin for the first quarter of fiscal year 2016 was 52.8 percent, compared with 37.4 percent in the first quarter of fiscal year 2015. The total number of installed customer seats increased 18 percent over the first quarter of fiscal 2015 to approximately 189,200. Hosted revenue churn was approximately 5 percent annualized in the first quarter of fiscal 2016.

Product revenues of $41.5 million were down 13 percent year-over-year and down 12 percent sequentially. Non-GAAP product gross margin was 67.6 percent in the first quarter of fiscal 2016, compared with 65.5 percent in the first quarter of fiscal 2015. GAAP product gross margin for the first quarter of fiscal year 2016 was 67.5 percent, compared with 64.8 percent in the first quarter of fiscal year 2015.

Support and services revenues of $19.1 million were up 7 percent year-over-year and 2 percent sequentially. Non-GAAP support and service gross margin was 76.5 percent in the first quarter of fiscal 2016, compared with 77.0 percent in the first quarter of fiscal 2015. GAAP support and service gross margin for the first quarter of fiscal year 2016 was 75.4 percent, compared with 76.0 percent in the first quarter of fiscal year 2015.

As of September 30, 2015 the company had $106.1 million in cash, cash equivalents and short-term investments and no outstanding debt. The company generated $19.6 million in cash flow from operations in the quarter ended September 30, 2015.

Selected Operational Metrics

Quarter Ended

06/30/15

03/31/15

12/31/14

09/30/14

Recurring Revenue as a Percent of Total Revenue

Annual Recurring Revenue Run Rate (in millions)

Cloud Average Monthly Recurring Revenue Per Customer

Cloud Monthly Average Revenue Per User (ARPU)

Cloud Average # of Seats per Customer

Cloud Revenue Churn Rate Annualized

Non-GAAP Gross Margin-Product

Non-GAAP Gross Margin-Hosted and related services

Non-GAAP Gross Margin-Support and Services

Total Company Headcount

First Quarter of Fiscal 2016 Business Highlights

ShoreTel Rolls Out ShoreTel Connect – Unique Common Platform, User Experience for Cloud, Onsite and Hybrid Unified Communications

During the quarter, ShoreTel rolled out ShoreTel Connect™, a transformational, single platform and user interface that provides business communications from the cloud, onsite or a hybrid combination of both. ShoreTel Connect changes how companies communicate with a unique new collaboration experience that unites groups and adapts to individual preferences. With ShoreTel Connect, businesses gain flexibility and customer insights and increase their ability to collaborate with employees inside as well as partners and customers outside the company – all while lowering IT operating costs.

Unlike other communications vendors that work either in the cloud or onsite and put the onus on companies to choose how to best deploy and integrate disparate platforms, ShoreTel Connect is designed to simplify the way our customers' deploy, manage, scale, and secure phone systems. As a single platform and user interface, ShoreTel Connect can be configured multiple ways for the cloud, onsite and mixed or hybrid options to fit with individual company growth and business models; ensuring what companies select today will grow with them as their needs change in the future.

ShoreTel Connect includes many new and enhanced features with capabilities that include:

Personalized call handling and call routing for both office and mobile devices

ShoreTel Connect Contact Center which is tightly integrated with UC offerings to increase agent productivity and customer satisfaction

Advanced collaboration tools including instant messaging, audio and web conferencing, point-to-point video and desktop sharing

Seamless feature integration and collaboration apps for smartphone, tablet and wearable devices

Many specialized apps like voicemail to text, mobility, emergency notification, integrated call recording, and enhanced paging.

ShoreTel Delivers Tight Integration of Leading Business Applications with ShoreTel Connect ONSITE and CLOUD

As part of the Connect roll-out, ShoreTel has integrated advanced CRM applications with...


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